By OptiVal Editorial Desk
Hiring your first employee in Canada is one of those milestones that feels like growth and paperwork at the same time. The growth part is fun. The paperwork part is where most first-time employers stumble, usually in the same few places: they forget to open a payroll account, they miss a remittance deadline, or they treat the employee like a contractor and hear about it from the CRA later. This checklist walks you through the whole setup, in the order you actually need to do it.
Step 1: Open a CRA payroll account before the first payday
Before your employee works a single shift, you need a payroll program account with the Canada Revenue Agency. If you already have a business number from a GST/HST registration, you just add a payroll account to it. If you don’t have a business number yet, register for one first. You can do both through CRA My Business Account, or call the CRA’s Business Enquiries line at 1-800-959-5525.
Your payroll account number looks like your business number plus RP and a four-digit reference, something like 123456789 RP0001. You will use it every time you remit. Register at least a couple of weeks before the first payroll run so the account is active when you need it.
Step 2: Collect the paperwork on day one
On or before your employee’s first day, get three things:
- A completed federal TD1 (Personal Tax Credits Return), which tells you how much income tax to withhold.
- A completed provincial TD1 (the Ontario version, if that’s where the work happens).
- Their Social Insurance Number. Record it and hand the document back.
You don’t send the TD1s to the CRA. You keep them on file and produce them if you are ever reviewed. If an employee doesn’t hand one in, you withhold tax as if they claimed only the basic personal amount, which usually means more tax comes off their pay than necessary. Worth chasing.
Step 3: Know what comes off every paycheque
Each pay period you deduct three things from the employee’s gross pay: income tax (based on the TD1 and CRA payroll tables), CPP, and EI. Then you add your own employer share on top. That’s the part people forget to budget for.
For 2026, the numbers are:
- CPP: 5.95% from the employee and 5.95% from you, on earnings between $3,500 and $74,600. Maximum $4,230.45 each. Earnings between $74,600 and $85,000 attract CPP2 at 4% each (maximum $416 each).
- EI: 1.63% from the employee on insurable earnings up to $68,900 (maximum $1,123.07). Your employer share is 1.4 times the employee premium, so 2.282% (maximum $1,572.30).
These maximums reset every January 1, so don’t carry last year’s spreadsheet forward. The CRA publishes the current payroll deduction tables here: CRA payroll deduction tables.
What hiring your first employee in Canada really costs
Say you hire someone at $60,000 a year. Your 2026 employer costs on top of that salary: CPP of $3,361.75 (5.95% of $56,500) and EI of $1,369.20 (2.282% of $60,000). That’s $4,730.95 in employer contributions, so the real cost of that $60,000 salary is about $64,731, roughly 8% more than the salary figure. Budget the full number from day one, not just the salary.
Step 4: Remit on time, every time
As a new employer, you remit by the 15th of the month following each pay month. Once you’ve been running payroll for a year, the CRA assigns you a remitter category based on your average monthly withholding: under $25,000 stays monthly; $25,000 to $99,999 moves to twice-monthly; $100,000 or more goes to within three business days of each payday.
The part that deserves your full attention: source deductions are held in trust for the government. Late or missing remittances draw penalties and interest quickly, and directors can be held personally liable for unremitted source deductions. Put the remittance date on your calendar the same day you set up payroll.
Step 5: File T4s and issue ROEs
By the last day of February each year, you file a T4 slip for every employee plus a T4 Summary covering the whole business. The T4 reports employment income, CPP and EI deducted, and income tax withheld. Miss the deadline and penalties apply, starting at $100.
When someone stops working for you (a layoff, a quit, a leave), issue a Record of Employment within five calendar days of the interruption of earnings. Service Canada needs it to process any EI claim, and your former employee will notice if it’s late.
Ontario extras: WSIB and the health tax
If you’re in Ontario, two more registrations may apply. Most employers in mandatory industries (construction, manufacturing, transportation, hospitality, retail and others) must register with the WSIB within 10 calendar days of hiring their first worker, including part-time and casual staff. Premiums are based on your industry classification and payroll, and registration protects you from being sued over workplace injuries.
Ontario’s Employer Health Tax won’t touch you at one employee: the exemption covers the first $1 million of annual Ontario payroll, and it stays at $1 million through 2028. Just know it exists for when you grow.
The mistakes first-time employers keep making
Four patterns show up again and again:
- Calling an employee a contractor. If the CRA reclassifies the relationship, you owe back CPP and EI (both shares), plus penalties and interest. If you’re unsure, read our guide on how the CRA decides between contractor and employee before you choose.
- Forgetting the employer share. Your remittance includes both the deductions from the paycheque and your matching CPP and EI. Budget for both.
- Missing the remittance date. The 15th-of-the-month deadline for new employers is easy to overlook when you’re busy running the business.
- Using last year’s rates. CPP and EI maximums change every January. Update your payroll software or tables before the first January run.
None of this is complicated once it’s set up. The expensive part is always the part that got skipped.
Doing payroll yourself for one employee is doable, but the remittance calendar and the year-end slips are where small mistakes get expensive. Our payroll service runs $29 per employee per month plus a $149 setup, and we handle the deductions, remittances, T4s and ROEs. Book a free consultation and we’ll get your first hire set up properly from the first payday.
